Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $20,000 for a copy of the software. Although Sunny Dale can use the software as long as it wants, Maas expects that Sunny Dale will use the software for approximately 5 years. Maas does not anticipate any further interaction with Sunny Dale following transfer of the license. How much revenue should Maas recognize in the first year of the contract?
A) $0
B) $4,000
C) $5,000
D) $20,000

Question

Quizplus · Accepted Answer

Because Maas's ongoing activities will not affect the value of the license, the software has standalone functionality, and the license transfers a right of use. Therefore, all license revenue can be recognized upon transfer of control of the software to the customer.

Maas LLP Developed Software That Helps Farmers to Plow Their